A1M Pharma · e the stock into our Bear Case (SEK 0,4)territory –which would need A1M pharma to performe more studies before entering phase II. This would probably leading to severe

Important information: All information regarding limitation of liability and potential conflicts of interest can be found at the end of the report Redeye, Mäster Samuelsgatan 42, 10tr, Box 7141, 103 87 Stockholm. Tel. +46 8-545 013 30, E-post: [email protected]

Initiation of Coverage

Equity Research 23 September 2019

KEY STATS

Ticker A1M.ST Market First North

Share Price (SEK) 1,6 Market Cap (MSEK) 201 Net Debt 19E (MSEK) -20 Free Float 90 %

Avg. daily volume (MSEK) 0,82

BEAR BASE BULL 0,4

2,3

5

KEY FINANCIALS (SEK)

2017 2018 2019E 2020E 2021E 2022E Net sales 0 0 0 0 0 0 EBITDA -68 -87 -14 -29 -27 -28 EBIT -68 -87 -14 -29 -27 -28

EPS (adj.)

2017 2018 2019E 2020E 2021E 2022E EPS (adj.) -8,2 -4,2 -0,1 -0,2 -0,2 -0,2 EV/Sales N/A N/A N/A N/A N/A N/A EV/EBITDA N/A N/A N/A N/A N/A N/A EV/EBIT N/A N/A N/A N/A N/A N/A P/E N/A N/A N/A N/A N/A N/A

ANALYSTS Jakob Svensson [email protected] Anders Hedlund [email protected]

A bright future ahead Despite its past disappointments, we see real potential in A1M Pharma’s pivot to develop

ROSgard for acute kidney injury (AKI). New CEO Tobias Agervald is moving the company

forward with a viable clinical plan to address an important area of unmet medical need with

blockbuster sales potential.

Pre-clinical push and positive phase I

A1M’s significant pre-clinical data for ROSgard gives valuable insight into its mechanism of

action. Since 2018 the company has drawn on this to complete multiple positive studies of

the drug’s impact on AKI. Last week A1M Pharma reported positive result form their phase

I single dose trial, next step will be a multiple dose study followed with a phase Ib study in

patients.

Substantial benefits

AKI can be deadly and is a very costly burden on public health spending. Yet no treatment

is available for the disease currently. Accordingly, a breakthrough in AKI would bring

substantial benefits - both for patients and for society – and has scope to achieve

blockbuster peak sales of some USD 1.4 billion.

Strong owner

A1M Pharma have in the last year attracted a lot of professional investors in their capital

raises. A few that stands out is Rutger Arnhult, Max Mitteregger (Hedgefund manager at

Gladiator) and Jan Sthålberg (EQT founder).

Upside potential

Redeye initiates coverage with a Base Case of SEK 2,3 per share. We want to point out the

coming catalyst in data from phase I MAD and phase Ib, which we expect in Q1 2020

respectively Q3 2020. Our Bull Case of SEK 5 factors in positive data from phase IIa study

with potential partner deal on the table. A unclear outcome in the phase Ib study next year

would take the stock into our Bear Case (SEK 0,4) territory – which would need A1M

pharma to performe more studies before entering phase II. This would probably leading to

severe dilution through future capital raises.

A1M Pharma Sector: Biotech

REDEYE RATING

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A1M.ST VERSUS OMXS30

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0,5

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1,5

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2,5

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OMXS 30A1M Pharma

FAIR VALUE RANGE

Finan

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REDEYE Equity Research A1M Pharma 23 September 2019

2

Investment Case A bright future

While A1M Pharma has struggled to find the optimal path forward for ROSgard over its long

history, it now benefits from a clear story. Under new CEO Tobias Agervald and other new members of senior management, plus new board members Göran Forsberg and Johannes

Hulthe, the new organization is capable of taking A1M in the right direction, we believe.

We estimate that ROSgard can reach a peak sale of USD 1.4 billion and that a licensing deal

could be done after a successful phase IIb study. According to us, A1M Pharma has an

upside of some 45%.

Strong pre-clinical data, well defined clinical path

Thanks to the company’s long history, there is also a solid pre-clinical portfolio for ROSgard.

Because of this A1M has strong insights into how ROSgard works and where it would be

optimally applied. Since 2018 the focus has been on acute kidney injury (AKI), which has produced positive pre-clinical data across multiple studies. Last week positive study data

were presented from the phase I study with single dose. ROSgard was well tolerated and

showed a good pharmacokinetic profile. The results justify continuing studying ROSgard in a

multiple-dose study.

Strong owners

With shareholders, including professional investors such as Rutger Arnhult, Max Mitteregger,

Jan Sthålberg, and Unionen, to name a few, we assume that there will be no problem to raise

further capital.

Unmet medical need

Today there is no treatment for AKI and the disease carries substantial costs for hospitals.

Around 1% of the UK National Health Service budget (around GBP 1.3 billion) is associated

with AKI. A comparable figure for the US is more than USD 5 billion per year according to

industry sources. Apart from its financial cost, AKI is also deadly with a mortality rate in

severe cases of around 50%.

Upside potential

Redeye initiates coverage with a Base Case of SEK 2,3 per share. Our Base Case represent a

potential upside of some 45% from share’s current levels. We see data from phase I MAD in

Q1 2020 and phase Ib in Mid 2020 as interesting catalyst.

Our Bull Case of SEK 5 factors in positive data from phase IIa study in 2022. We assume that

a partner deal can be reached around 12 months after successful data and estimates a deal

value of 200 million USD.

A negative outcome in the phase Ib study next year would take the stock into our Bear Case

(SEK 0,4) territory – which would need A1M pharma to go back to the drawing board and

probably leading to severe dilution through future capital raises.


3

Counter thesis

Early-stage development

ROSgard presented positive result from their phase I single-dose study last week

which is a good first step. But this is early clinical development, the prospects of

success are still low - we estimate a 15% likelihood of it reaching the market from

here.

Developing new drugs is a high-risk business and requires a hefty budget. We

assume that a phase IIa trial would cost around SEK 40-50 million and IIb SEK 150-

250 million.

At the moment the cash position is around SEK 50 million with an additional SEK 25

million to be included if the warrant in October is fully subscribed. Thus A1M

Pharma is financed until start of phase IIa, and we assume a capital raise in late

2020.

Competitors way ahead

Three competitors are in phase II or III in the same indication. We see it as likely that

at least one of these candidates could reach the market in the coming years.

If more than one of the competitors gains approval, the niche could become less

attractive for new candidates. A new candidate would need to bring something new

to the table - either in effect or safety. It’s too soon to tell if ROSgard offers this

potential.

Lack of catalyst

After completing phase Ib, the next major catalyst is data from phase IIa, which in

our opinion will be in 2022, thus lack of potential triggers from mid-2020 and

forward. This will probably not be in advantage for the stock and could cool the

interest for A1M Pharma until data from phase IIa are on the horizon.


4

Company Description

A1M Pharma is a biotech company focused on developing a preventive treatment for acute

kidney injury (AKI) in patients undergoing open-chest cardiac surgery. There are currently no

approved therapies for the prevention and treatment of AKI. A1M Pharma’s lead drug

candidate, ROSgard, is a biologic that mimics one of the body’s most powerful and universal

defense system against oxidative stress. The company was founded in 2008 by researchers

at Lund University and the organization is currently based in Lund, Sweden. A1M Pharma

listed its shares on Nasdaq First North in 2013.

ROSgard has multiple molecular mechanisms which individually and synergistically can

prevent cell- and tissue damage. Based on integrated assessment of these mechanisms,

combined with preclinical pharmacology data and intrinsic drug properties of ROSgard, A1M

Pharma recently decided to initially target AKI in cardiac surgery for clinical development.

ROSgard is currently being evaluated in a clinical phase Ia study, and results from the first-in-

human single ascending dose (SAD) study was successful. Next step will be a multiple-dose

study (MAD).

This year the company has undergone a comprehensive organizational restructuring,

including multiple changes in both the management team and the board of directors. The

new leadership aims to successfully implement the company’s new strategy, to execute the

early phase clinical program of ROSgard, and, in the future, potentially enter into value-adding

partnerships and licensing agreements. An deal would probably be an alternative after the

completion of phase IIa or IIb.

Furthermore, the company recently completed a directed share issue of SEK 27.2 million to

fund the first planned study of ROSgard in patients undergoing cardiac surgery . The directed

share issue included several professional investors and an institution, which strengthened

A1M Pharma’s ownership structure significantly. Going forward, the company’s short-term

focus will be on finishing the early phase clinical program in healthy subjects and the phase

Ib study in patients.


5

Historical Milestones

A1M Pharma has a long history but should be considered almost a new company as of this

year, with fresh goals and a lot of new faces in the management team and board. Regardless,

the company’s milestones, as summarized below, provide an interesting history of A1M

Pharma. In our view, investors should focus on the new goals and not so much on the

company’s history. The milestones achieved before mid-2018 are almost those of another

company, and in our opinion, don’t represent the new A1M Pharma. We believe the stock is

still being viewed in the context of this history and is not judged according to its renewed

potential.

A1M Pharma: Historical Milestones

1974 - Bo Åkerström, one of the company's founders, initiates research on the endogenous protein A1M.

2008 - The company is founded as Preelumina AB with the purpose of developing new treatments and

diagnostics for preeclampsia.

2010 - Preelumina AB changes its name to A1M Pharma.

2013 - A1M Pharma lists its shares on Spotlight Stock Market (previously AktieTorget).

- A1M Pharma receives Orphan Drug Designation in Europe for preeclampsia.

- The company decides to complement its drug development regarding preeclampsia by adding a focus

on kidney diseases.

- A1M Pharma initiates preclinical studies in acute kidney disease in collaboration with Professor

Faikah Güler from the research organization Phenos, originating from Hannover Medical School.

- A rights issue generating SEK 31,9 million is conducted along with a capital raise of SEK 15,5

million through exercised warrants of serie TO1.

- The company initiates a development collaboration with CRO Richter Helm BioLogics regarding

technology, process development and preparation of large scale production of A1M Pharma's drug

candidate according to GMP.

- A rights issue generating SEK 39,7 million is conducted.

- A preclinical short-term study in an animal model shows a solid kidney-protective effect with

ROSgard's active substance in connection with radiation therapy.

- A1M Pharma conducts initial immunogenicity studies for ROSgard's active substance in an animal

model, which show promising results and indicate further development of the candidate.

- A rights issue generating SEK 65,8 million is carried out.

- The company finishes all preparations necessary to apply for initiation of clinical studies, including

CRO partnership, large scale GMP production and GLP-toxicology studies.

- A1M Pharma conducts a list change from Spotlight Stock Market to Nasdaq First North.

- A1M Pharma applies, with the Swedish Medical Products Agency, for approval to start a clinical

phase I trial. SMPA requests additional information, which cause a delay, but the application is finally

approved in November.

- A rights issue generating net proceeds of SEK 48,5 million is conducted.

- Positive results from preclinical studies in acute kidney disease are reported.

- A1M Pharma presents a clinical development plan for ROSgard focused on acute kidney disease

associated with cardiac surgery.

- A rights issue generating SEK 70,5 million before transaction costs is conducted, followed by a

directed share issue of SEK 27,2 million a few months later. Among the investors participating in the

directed issue were Max Mitteregger, Rutger Arnhult, Unionen and EQT-founder Jan Ståhlberg.

- The company carries out a thorough organizational restructuring of both the management team and

board of directors.

- A1M Pharma initiates the clinical phase I study for ROSgard.

- A1M Pharma presents positive result in phase I single dose.

2019

2014

2015

2016

2017

2018


6

Board and management

Following the restructuring and organizational changes conducted during 2019, both the

management and the board of directors are now focused on bringing success to A1M

Pharma and we believe they have a big opportunity to do so based on their historical

achievements. Since the inception of the “new” A1M Pharma, the company has developed in

a positive direction, which, combined with management and the board’s strong personal

track records, leaves us with confidence in the current leadership. CEO Tobias Agervald

joined A1M Pharma from his previous role as Senior Medical Director at Astellas Pharma

Global Clinical Development. Chairman of the board Cristina Glad has more than 25 years

of research and business development experience in the pharmaceutical industry, as well as

extensive board experience from biotech companies such as Rhovac

A1M Pharma - Management Position Experience

Tobias Agervald (1976) CEO

Tobias Agervald took office as CEO of A1M Pharma in

January 2019. Tobias Agervald is an associated professor

and specialist in internal medicine and nephrology with

extensive experience in global research and development

of pharmaceuticals in both early and later clinical stages.

Furthermore, Mr. Agervald has extensive experience in the

pharmaceutical industry from executive positions and

advisory board work at large pharma companies such as

AbbVie, Sanofi, Astellas and SOBI.

Magnus Gram (1980) CSO

Magnus Gram is one of the inventors and founders of A1M

Pharma. He is also the originator behind several of the

medical application of A1M and is listed as an inventor on

several of the company’s medical patents and patent

applications. Mr. Gram holds a PhD in Medical Science

and was appointed CSO of A1M Pharma in June 2019.

Torun Labedzki (1970) CFO

Torun Labedzki joined as CFO of A1M Pharma in August

2019 from her previous position as Business Controller at

Apoteket AB. She has more than 20 years of experience

in business and finance from several industries such as

health care, TMT and consumables. Ms. Ladebzki holds a

degree in Business and Administration from Stockholm

University.

A1M Pharma- Board of Directors Position Experience

Cristina Glad (1952) Chairman

Cristina Glad was appointed Chairman in 2019 after having been a

board member since 2012, while simultaneously performing

consultancy work for the company. She has more than 25 years

of research and business development experience in biotech and

diagnostics. Ms. Glad holds a PhD in biochemistry, an Executive

MBA and is a member of the Royal Swedish Academy of

Engineering Sciences.

Göran Forsberg (1963) Board member

Göran Forsberg joined the board of A1M Pharma in 2019. He has

extensive experience in a number of areas of pharmaceutical

development and is currently CEO of the Swedish biotech

company Cantargia. Mr. Forsberg holds a PhD in Biochemistry

and is an Associate Professor at KTH Royal Institute of

Technology.

Johannes Hulthe (1970) Board member

Johannes Hulthe is Co-founder, CEO and board member of the

medtech company Antaros Medical AB. He holds a PhD in

Cardiovascular prevention and a MSc in Economics. Mr. Hulthe

has more than 17 years of experience in the pharmaceutical

industry, mainly from AstraZeneca were his last roll was vice

president. Johannes and joined the board of A1M Pharma in 2019.


7

Ownership

Avanza Pension is the largest shareholder in the company (through nominee registered

accounts) with 10%-plus of the capital, which indicates a large number of retail investors.

Following Avanza Pension are many qualified private investors, including Rutger Arnhult (M2

Asset Management), Max Mitteregger (Galba Holding), Jan Ståhlberg, and Axel Karlsson.

Furthermore, in the recent directed share issue, A1M Pharma attracted its first institutional

investor, Unionen.

The management team and board of directors own 0.52% and 0.05% of the company’s

shares respectively, with CEO Tobias Agervald having by far the largest insider holdings in

terms of both shares and warrants. We view the insider ownership as clearly inadequate, but

we take management’s short time at the company into consideration. However, we would

welcome an increase in insider ownership in the coming months. Investors should, however,

bear in mind that insiders only have certain windows of opportunity in which to invest, and

such windows could be closed on account of upcoming study data.

Ownership structure per 19/7 2019 Holdings Capital Votes

Avanza Pension 13 955 857 10,76% 10,76%

M2 Asset Management AB 13 097 776 10,10% 10,10%

Jan Ståhlberg 9 523 810 7,34% 7,34%

Unionen 4 000 000 3,08% 3,08%

Galba Holding AB 3 150 000 2,43% 2,43%

Axel Karlsson 2 504 977 1,93% 1,93%

Nordnet Pension 2 180 886 1,68% 1,68%

John Fällström 1 800 000 1,39% 1,39%

Wilhelm Risberg 1 590 224 1,23% 1,23%

UBS Switzerland AG 1 535 836 1,18% 1,18%

Håkan Nilsson 1 339 396 1,03% 1,03%

Other shareholders 74 988 983 57,83% 57,83%

Total 129 667 745 100,00% 100,00%

Ownership per 31/8-2019 Position Holdings % of Total Warrants

Management

Tobias Agervald CEO 588 240 0,45% 196 080

Magnus Gram CSO 61 044 0,05% 7 844

Torun Labedzki CFO 30 009 0,02% -

Total holdings of Management 679 293 0,52% 203 924

Board of Directors

Cristina Glad Chairman 45 705 0,04% 12 188

Göran Forsberg Board member 25 000 0,02% -

Johannes Hulthe Board member - -

Total holdings of Board of Directors = 70 705 0,05% 12 188


8

Upcoming catalysts

Catalysts are vital for small biotech companies as they draw attention to the company and

potentially affect the stock price. We foresee stable news flow for A1M in the coming two

years, with the most important catalysts shown below. The key catalyst in the coming 12

months is top-line data from the phase Ia MAD and Ib trials. Afterward, the newsflow will

most likely be more modest until topline of phase IIa.

Source: Redeye Research

Catalyst Likelihood Impact Timeframe

Start of Phase Ia MAD Highly Minor < 6 months

Topline Phase Ia MAD Likely Important 6-9 months

Start of Phase Ib Likely Minor 6-9 months

Topline of Phase Ib Moderate Very important 9-12 months

Start of Phase IIa Highly Modest >12 months

Topline Phase IIa Moderate Very important 24 months

Start of Phase IIb Moderate Modest >24 months

Topline Phase IIb Moderate Very important >24 months

Partnership for Phase III Moderate Very important >24 months


9

Stock history

A1M Pharma has a long but shaky history, with various changes to the business plan and

clinical focus. In our view, however, A1M Pharma should be looked at with fresh eyes as of

mid-2018, following the company restructuring and strategic shift towards a clinical focus on

AKI.



10

Projects

A1M Pharma is focused on developing its lead drug candidate ROSgard – a

recombinant and modified variant of the endogenous protein alpha-1-microglobulin

(A1M). ROSgard has multiple molecular mechanisms which protect DNA,

mitochondria, cells, and tissues against oxidative stress.

In brief, ROSgard can capture and neutralize harmful and reactive free radicals

(including reactive oxygen species, or ROS) that form during oxidative stress. It can

also bind to heme (the oxygen carrying molecule in red blood cells) which at high

concentrations are toxic to the kidneys. Finally, ROSgard can bind, protect and

improve mitochondrial function during oxidative stress. Overall, this enables

protection of exposed tissue and support of reparative processes.

ROSgard is currently being developed for the prevention and treatment of AKI in cardiac surgery, for which there is currently no available treatment. Approximately 2

million patients performed cardiac surgery per year and of these around 30% is in high risk of developing AKI according to Meersch et al. (2017). Thus approximately 600,000 patient’s sufferers from this condition each year and the outcome of AKI is

significant morbidity and mortality, while patients who survive also have a risk of

developing chronic kidney disease (CKD). CKD can progress towards end-stage renal disease (ESRD), also called kidney failure. In such cases, the patient needs

either dialysis or a kidney transplant to survive. However, many patients die before

they develop ESRD because of other risk factors.

Pipeline

A1M Pharma has one drug candidate in development, but no other candidates in the

pipeline – at least none it has communicated to the market. Although the drug

candidate is initially focused on a niche market, there is potential to broaden the

indication further, especially into other AKI segments – for example, into sepsis or

delayed graft function in kidney transplant recipients – if A1M Pharma can produce

solid study data. Potentially broadening the pipeline in the future could create even

more value for shareholders.

A cute kidney injury

Acute kidney injury (AKI) is a state where the kidneys suddenly stop working. It is a

life-threatening condition and requires immediate treatment. It may be reversed

though, and patients who are otherwise in good health have a good chance of

recovering normal or nearly normal kidney function. AKI is most common in patients

who are already sick and often hospitalized, with critically ill patients in intensive

care representing a high-risk group.

AKI causes the kidneys to suddenly lose their ability to filter waste products from

the blood. Without this filtering ability, there is a chance that levels of waste may

accumulate to a dangerous level, with blood levels potentially getting out of balance.

Principal causes of AKI include:

A condition that slows blood flow to the kidneys, such as low blood

pressure, heart disease or heart attack, infection, or excessive bleeding

(pre-renal AKI)

Intrinsic kidney damage caused by e.g. toxins, drugs, harmful antibodies

and immune reactions (intra-renal AKI)


11

Blockage of the kidneys’ urine drainage tubes, this prevents waste

products from being excreted from the body in the urine, which can be

caused by cancer, kidney stones or bladder problems, for example (post-

renal AKI)

Symptoms of AKI can be hard to spot at first but can include not enough urine, or

swelling in the legs, ankles or feet. The patient may feel tired or having trouble

catching their breath. Severe AKI can cause seizures or coma.

Treatment of AKI usually requires the patient to stay in hospital, although most

patients with AKI are already in a hospital for another reason. Severe AKI requires

treatment with dialysis to replace the kidney function until the organ recovers. The

aim is to treat what caused the kidney to fail and for the kidney to recover to normal

functionality.

More than 13 million people are affected by AKI every year. Suffering from AKI

increases the chances of other health problems, with a higher risk for subsequent

kidney failure. Severe cases of acute renal failure can result in death. Studies on

long-term follow-up (one to ten years) have shown that around 12.5% of AKI

survivors require dialysis, and 19-31% of them will develop CKD. For already

hospitalized patients, the mortality rate of AKI is 40-50%, and around 2 million

people worldwide each year die from the condition.

Oxidative stress and AKI

Oxidative stress occurs when the body transforms oxygen to substances that have

the potential to be extremely harmful to organs and tissue. Acute oxidative stress

often arises in connection with e.g. major surgery, transplantation, chemotherapy or

sepsis. ROS is the name for some of the toxic molecules that can be formed during

oxidative stress and which may react uncontrolled with endogenous molecule of

blood, tissue, or cells. The kidneys are for several reasons particularly vulnerable to

damage caused by oxidative stress, and AKI is therefore a relatively common

clinical manifestation.

The medical costs associated with AKI

The costs associated with AKI are very high for hospitals. AKI consumes 1% of the

National Health Service (NHS) budget in the UK. In 2018/2019, the NHS’s budget

was around GBP 129 billion, implying costs associated with AKI of around GBP 1.3

billion. In the US the cost for hospitalization owing to AKI is USD 5-24 billion.

Patients who require dialysis are the most expensive, costing somewhere around

USD 11,000-42,000 more per hospitalization than a patient without AKI. These

estimates only account for the costs incurred during hospitalization and do not

include the costs that can result as a long-term consequence of AKI.

Based on these estimates, we see the potential market for treatment of AKI as huge,

as today there is no approved treatment to prevent it. A treatment that could prevent

AKI from developing could potentially save many lives, and the benefit is easy to

calculate using today’s costs for intensive care.


12

ROSgard

ROSgard is a recombinant and modified variant of the endogenous protein A1M.

Endogenous A1M was discovered more than 40 years ago and has been subject to

extensive research during the last decades. ROSgard mimics one of the body’s own

and most powerful protection against oxidative stress. It also harbors significant

advantages compared to other traditional anti-oxidants such as vitamins C and E:

It is more efficient in radical binding than other antioxidants

It does not present an oxidative threat after binding of radicals and/or

reducing oxidants

It is subject to a “homing mechanism” to the kidney, making the kidneys an

attractive target for protection

ROSgard represent a treatment paradigm based on augmentation of the body’s own

defense system in acute clinical conditions when the body is unable to manage the

acute burden of oxidative stress, such as during AKI.

ROSgard is being developed for the prevention and treatment of AKI in cardiac

surgery. This is considered an attractive first indication, also backed up by industry

sources, due to ROSgard’s ability to target several important pathways of AKI in the

setting of cardiac surgery.

How ROSgard works in cardiac surgery

A heart-lung machine is used during open-heart surgery, creating hypoxia when

connected. During the operation, when the patient is connected to the heart-lung

machine (“on-pump”), the kidneys suffer repeated minor ischemic damage. Once

disconnected (“off-pump”), the kidneys enter a state of severe oxidative stress with

subsequent risk for AKI development during the initial 48-72 hours after surgery.

Hemolysis is a complication related to the use of a heart-lung machine, which

means red blood cells (RBC) rupture, releasing heme (part of hemoglobin).

Hemoglobin is a protein that normally transports oxygen in the blood. However,

studies have shown that rupture of RBCs and the release of free heme is toxic to the

kidneys and an important contributor to AKI in cardiac surgery.

Thus, oxidative stress combined with release of free heme are considered important

steps towards AKI development in cardiac surgery. These events trigger an

inflammatory process which fuels additional damage to the kidneys. ROSgard can

effectively prevent the deleterious effects of oxidative stress and free heme and is

therefore a promising therapeutic candidate in AKI.

In the proposed treatment regime ROSgard will be given as an intravenous dose

shortly before surgery, followed by a few doses after surgery, allowing it to protect

the kidneys before and during the generation of oxidative stress. ROSgard will also

counteract toxins, e.g. heme, in the blood before they reach the kidney. Furthermore,

ROSgard will be distributed to the kidneys and protect them against the oxidative

stress that is generate during cardiac surgery. The process is illustrated below.


13

Source: A1M Pharma

Patent

A1M Pharma has approved patents in all major regions for the medical use of A1M

and A1M-based therapies. These patents cover a broad range of clinical conditions characterized by abundant oxidative stress, including their lead indication AKI. The

company also has pending patents related to composition of matter for their lead

compound ROSgard. The patent portfolio beyond these core families is diverse, and we assume that the new management will streamline the portfolio to match the

new strategic and commercial objectives for A1M Pharma.


Patent group Approved in geographical zone Expiration date

Medical use of A1M EU/US/AU/JPN 2029

Diagnosis and Treatment of Preeclampsia EU/US/AU/JPN/CA/MX/KR/NZ/ZA 2028 and 2030 (US)

Biomarkers for Preeclampsia EU/AU/JPN/CA/MX/NZ/ZA 2031

α-1-Microglobulin for use in treatment of

Mitochondria-Related DiseasesEU/AU/MX/NZ 2033


14

Solid preclinical data

Since 2018, A1M Pharma has built up a solid preclinical data portfolio in AKI, leading

the company to believe that ROSgard could have significant potential in AKI.

In a study performed by a CRO in Germany on 20 mice, ROSgard (ten mice) or

placebo (the other ten) were administered to animals in conjunction with renal ischemia reperfusion injury. All the mice injected with ROSgard survived. Mortality in

the placebo arm was 40%. Although a small preclinical study, it does indicate that

ROSgard could act to protect against AKI. Improvements in renal function and

various biomarkers of renal damage was also observed in the group who received ROSgard as compared to placebo

Source: A1M Pharma

Another preclinical study was carried out in the US together with a highly recognized

Professor of Nephrology. Using a rat AKI model of ischemia reperfusion injury. this

study observed that, following renal injury, kidney function was almost two times

higher in the group that received ROSgard compared to placebo. It also

demonstrated an approximately 70% reduction in the proteinuria in animals treated

with ROSgard compared to placebo.

Source: A1M Pharma


15

ROSgard focus going forward

Primary focus for clinical development of ROSgard will initially be on prevention of AKI in patients undergoing cardiac surgery, an indication that, based on the substantial preclinical package, seems particularly suitable for the company to exploit. There is currently no approved treatment against AKI in association with cardiac surgery, which suggests a golden opportunity for A1M Pharma.

Furthermore, the indication offers various advantages during development, such as a large patient base, short duration of treatment, and well-defined regulatory requirements from the authorities. Given the unmet medical need and relatively easy setup for clinical studies, the indication appears a good first test for the candidate, with the potential for broader aims in the future.

A straightforward clinical programme A1M Pharma is underway with a phase Ia study in healthy subjects who will be

given single ascending doses (SAD) first and then multiple ascending doses (MAD)

of ROSgard. The primary goal of the study is to show that ROSgard is safe and

tolerable in humans, with a secondary goal of assessing the pharmacokinetics

under various dosing conditions.

Last week A1M Pharma presented positive phase I (SAD) data. ROSgard was well

tolerated and showed a promising pharmacokinetic profile. The study also showed

a plasma concentration that is expected to have a therapeutic effect with no serious

side effects reported. The result from the study justifies continuing study ROSgard

in a multiple-dose study, to complete the phase Ia program.

If phase Ia is successful, the next step will be to perform a small phase Ib study in

around 20 patients undergoing open-chest cardiac surgery with the use of a heart-

lung machine. The primary and secondary goals in this study will be the same as in

phase Ia but also closely evaluating the patients to gain important understanding of

how to design the phase II study. Vital information on doses, frequency of dosing,

and safety profile could be generated from this study ahead of a phase II study, de-

risking the clinical programme.

These three studies are estimated to be completed in Q3 20, with the first part of the

phase Ia already completed successfully and second part to start in Q4 19, with

data to be presented in late Q1 20. After that, it is assumed that the phase Ib will

start in Q2 2020 and to report data in Q3, totaling about six months, which is a

relatively short and effective study.

So far, the company has only obtained regulatory approval for the phase I SAD;

approval for the phase I MAD and phase Ib will most likely be obtained as the clinical

programme progresses. A1M Pharma has finances for both phase Ia and Ib, and

thanks to its solid ownership base, we believe it could conduct a directed share

issue in a swift manner should the need for more capital arise.

If all goes to plan with the development, phase IIa will start in late 2020/early 2021,

and the study will take approximately 1-1.5 years to complete. The company

believes after phase IIa could be an appropriate time to make a deal for the

candidate before moving to the next step. We, however, estimate that also a phase

IIb will be conducted before a potential deal, this will most likely raise the deal value

significant. There is a variety of options after phase IIa in terms of clinical trials:

including either a phase IIb/III or a phase III. The final decision will probably depend

on the data obtained from the phase IIa study. In our opinion a phase IIb will be

conducted followed by an extensive phase III which will be financed by a partner.


16

Big potential market

More than 13 million people each year are diagnosed with AKI, with high mortality

and the chance of developing chronic renal impairment, leading to further sickness

and a poorer quality of life. The global market is estimated to be worth more than

USD 2.6 billion and is seeing annual growth of 11%. This indicates the huge potential

in acute kidney injuries. Around 3 million patients are affected by AKI annually in

Europe, the US and Japan, and mortality rates are high, at about 700,000 patients

annually. In the US alone, AKI treatment affects hospital bills by around USD 10

billion each year. In the UK, AKI healthcare costs are estimated at SEK 4.4-6.4 billion

per year, which is more than the healthcare costs for breast, lung and skin cancer

combined.

We estimate the market for AKI in cardiac surgery is around 400,000-600,000

patients each year, based on two million cardiac surgeries performed globally. There

are currently no drugs approved to treat AKI following cardiac surgery and so no

historical sales are available for the indication.

Competitors to ROSgard

A1M Pharma has a few competitors trying to develop a treatment to prevent AKI

following cardiac surgery, one of which is currently in phase III. Quark

Pharmaceuticals is developing QPI-1002, a small interfering RNA (siRNA) targeting

the pro-apoptotic gene P53 and temporarily inhibiting the expression of the gene.

Both primary and multiple secondary endpoints were successful in a phase II clinical

study of 314 patients. The primary endpoint was to investigate the proportion of

patients developing AKI in the post-operative period until day 5, and the study

showed that treatment with QPI-1002 significantly reduced the incidence of AKI.

In 2018 Quark Pharmaceuticals started a pivotal phase III study in AKI following

cardiac surgery, enrolling 1,038 patients at high risk of AKI following cardiac surgery

at 115 sites globally. The phase III study is a double-blind, placebo-controlled, multi-

center study to evaluate the efficacy and safety of QPI-1002 in patients undergoing

cardiac surgery. The primary endpoint will be the proportion of subjects who

develop any of the components of major adverse kidney events at day 90 (MAKE90),

defined as death up to day 90, initiation of renal replacement therapy (RRT) up to

day 90, or an equal to or greater than 25% reduction in estimated glomerular

filtration rate at the day 90 visit. This new primary endpoint is based on Quark’s

phase II study. According to industry sources, the primary completion date for the

phase III study is expected during July 2021.

Angion Biomedica is another competitor, currently enrolling patients in a phase II

study with its drug candidate ANG-3777. The study will examine patients with a high

risk for AKI following cardiovascular surgery. ANG-3777 is a potent, small molecule

mimetic of hepatocyte growth factor, the sole ligand of the c-Met receptor. A

reduction of acute organ damage has been shown if the HGF/c-Met pathway is

activated, prompting Angion to start two separate phase II trials in different

indications, one in patients with presumptive delayed graph function post-transplant

and another in AKI following cardiovascular surgery. There is no information on

when study data will be available, but considering the other competitors, we believe

Angion’s data should be available during 2019 or 2020.


17

In 2018 Astellas Pharma acquired Mitobridge for USD 225 million. It is currently

enrolling patients for a phase II study including 220 subjects. The purpose of the

study is to evaluate the efficacy of post-surgery treatment with ASP1128 in subjects

at risk of developing AKI following coronary artery bypass graft (CABG). The primary

endpoint in the study examines the proportion of participants developing AKI based

on serum creatinine criteria within 72 hours. According to industry sources, the

primary completion date is expected in July 2020.

These three are, in our opinion, the main competitors to A1M Pharma for the unmet

medical need of preventing AKI. Investors should keep an eye on these studies as

the competitive landscape could swiftly change should any of them fail in their

studies or gain market approval. A1M Pharma is somewhat behind its main

competitors, but if all goes as planned, we still expect this to be a big enough market

to share among the lucky ones gaining approval.

Investors should also note that none of competitors mentioned here are not

targeting the same mode of action as A1M Pharma which could be a significant

advantage and offers opportunities for competitor differentiation. At present, there

is no approved treatment to prevent AKI; the only treatment options available are

dialysis and supportive care.


18

Market Opportunity and Estimates for ROSgard

There is still a long way to go before A1M Pharma will receive any revenue from

ROSgard. In our estimates, we have the first sales in 2028 but with potential upfront

and royalties from 2024. We expect that ROSgard will reach its peak sale of 1,4

billion after five years in the market.


Our valuation in A1M Pharma is based on the global potential and that ROSgard has

the potential to be one of several other drugs on the market in 8 years. We also

predict that A1M Pharma will license out ROSgard after a successful phase IIb, and

thereby assume that no further investment will be needed from A1M Pharma. We

assume that the target population is around 600 000 patients per year who

develops AKI in associating with cardiac surgery. According to us, ROSgard has the

potential to take 30% of the market, thus a peak penetration of 180 000 patients. We

assume that there will be at least two competitors on the market before ROSgard

reaches it and therefore we see a markets penetration of 30% as reasonable. Based

on discussion with the company and research we estimate a price per year for

ROSgard of 8000 USD. Based on these assumptions we estimate that ROSgard will

be launched in 2028 and reach a peak sale of 1.4 billion USD.


Year 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 2035 2036

Upfront

Cash flow MSEK 285

Probability 30%

Risk-adjusted CFs 85,5

MilestonesPh. III NDA 1st sale

Cash flow MSEK 95 237,5 332,5

Probability 30% 20% 10%

Risk-adjusted CFs 28,5 47,5 33,25

Sales/roaylties

Cases 2 000 000 2 000 000 2 000 000 2 000 000 2 000 000 2 000 000 2 000 000 2 000 000 2 000 000 2 000 000 2 000 000 2 000 000 2 000 000 2 000 000

# pts with AKI600 000 600 000 600 000 600 000 600 000 600 000 600 000 600 000 600 000 600 000 600 000 600 000 600 000 600 000

# pts treated with ROSgard 45 000 72 000 99 000 135 000 153 000 180 000 180 000 180 000 180 000

ROSgard market share 7,50% 12,00% 16,50% 22,50% 25,50% 30,00% 30,00% 30,00% 30,00%

launch curve 25,00% 40,00% 55,00% 75,00% 85,00% 100,00% 100,00% 100,00% 100,00%

ROSgard yearly cost $ 8 000 8 000 8 000 8 000 8 000 8 000 8 000 8 000 8 000

Net sales, ROSgard, $mm 360 576 792 1 080 1 224 1 440 1 440 1 440 1 440


19

ROSgard – Licensing and partner deal assumptions

We see a future partnership deal as vital for A1M Pharma and our valuation. In our

opinion, the most likely partner scenario would be after a successful hase IIb,

however partner deal can be reached in an earlier stage as well all depending on the

data.

There is a huge unmet medical need in the indication, and in our view, there should

be significant interest from partners for ROSgard if everything plays out correctly. It

will be important for A1M Pharma to get a partner that will be available to finance

further study and preferably have experience from regulatory processes. Apart from

this, the partner would also need resources to commercialize ROSgard in US and EU

and an attractive network of key individuals from the medical field, payers and key

opinion leaders.

In our opinion, A1M Pharma could finance their development in phase IIa and IIb, but

for phase III, which will enroll around 1000 patients, a partner would be needed.

Thus we expect a partner deal during 2024 of 100 million USD, which would

generate an upfront payment of 30 million USD and follow shortly after with a

milestone of 10 million USD in association with the start of phase III. Apart from

these two potential payments, we have estimates royalty of 25 million USD for NDA

and 35 million USD at the launch of ROSgard. Furthermore, we estimate that A1M

Pharma would have a royalty share of 18% from sales.

We argue that 100 million USD would be reasonable value for a partner deal since

Astellas Pharma acquired Mitobridge for 225 million USD. We take a conservative

stand and therefore assume around half of that deal value.

With a high interest in the field we also see the potential of A1M Pharma being

acquired by a smaller pharma company or specialty company if the phase IIb would

be successful. A potential speculator could be Astellas Pharma if their candidate for

AKI (ASP1128) were to be proven not suitable for the intended indication. In that

case, Tobias Agervald historical connections with Astellas Pharma could come in

handy.

ROSgard

Deal assumptions Year $mm

Upfront 2024 30

Phase III start 2024 10

NDA 2027 25

First Sale 2028 35

Total 100

Royalty Rate 18%



20

Financials Research & development and other costs

We estimate that A1M Pharma needs to invest around SEK 190-300 million from

now until the top-line data from its phase IIb study is released. After this event, we

assume that a partner would take on the cost for further development of ROSgard.

We estimate that the phase IIa trial will cost around SEK 30 million and a phase IIb

around SEK 110 million, risk-adjusted.

Other costs we estimate at around SEK 10 million per year because of the slim

organization. According to the Q2 19 report, the cash balance was SEK 52 million,

while A1M Pharma has an outstanding warrant that could bring in around SEK 28

million before transaction fees in October 2019. The warrant invites owners to buy

new shares in A1M Pharma for SEK 1 per share, making it well in the money at

present. In our opinion, the company’s current cash position is thus around SEK 65

million, including the warrant.

Capital

We see a need for capital of around SEK 40-50 million to conduct the phase IIa

study which we risk-adjust with 60% to SEK 24-30 million. The phase IIb we

estimate to SEK 150-250 million with a risk-adjustment of 45% to SEK 70-110

million. Based on the capital need we expect A1M Pharma to initiate a capital raise

during 2020 of around SEK 50 million. The company has conducted two directed

share issues in the last six months targeting professional investors, and we believe

further capital raises will be carried out in the same manner or as a rights issue.


21

Valuation

The target population of 600 000 patients per year with a high risk of

developing AKI

ROSgard could achieve a 30 percent market share, we judge – around

180 000 patients per year at the peak

We estimate ROSgard will cost USD 8,000 per year

Peak sale of USD 1.4 billion

A1M entitled to a royalty of 18 percent of sales, translates to SEK 2.5 billion

at peak sales

We assume a 15 percent chance of success from this stage, we risk-adjust

potential revenue

We assume a partner deal after a successful phase IIb in 2024

Deal value of 100 million USD including 30 million USD upfront

All in all, this leads us to a risk-adjusted net present value at SEK 423

million or SEK 3,3 per share

Factor in future cost though our sum-of-the-parts analysis leads us to set a

fair value at SEK 2,3 per share

A1M Pharma Valuation

Project Valuation Per Share

ROSgard 423 3,3

Cost -190 -1,5

EV 233 1,8

Cash 65 0,5

Fair value 298 2,3



22

Bu ll

In our Bull case, we assume 40% penetration of ROSgard

We estimate that 240 000 patients will be treated per year at the peak

Peak sale of 1.9 billion USD

A1M Pharma entitled to a royalty of 20 percent of sales, translates to SEK

3.5 billion at peak sales

Partner deal after positive phase IIa in 2022 with 200 million USD in value,

60 million USD upfront

15 percent chance of success from phase I

We see a Bull Case of SEK 653 million or SEK 5 per share

Bear

In our Bear Case, we assume that the data from phase Ib will be in a grey

area which would require more studies before entering phase II

A1M Pharma will have to go back to the drawing board and re-run the

phase I program

The need for more capital will arise and with that potential to multiple

dilutions before the project is back on track

We see a Bear Case of SEK 47 million or SEK 0,4 per share

A1M Pharma: Summary of scenarioanalysis

Bear Base Bull

SEK per share 0,4 2,3 5

Potential / Risk* -75% 45% 214%

* Base on closing price 20 Sep 2019: SEK 1,59



23

Peer Valuation

Our peer-valuation don’t impact our Base Case; thus, it’s only a way for investors to

get some perspective about how similar companies are valued. Investors should

also bear in mind that peer-valuations should only be seen as indicative because

companies and projects can vary greatly. Also, peers are only interesting if you

could find relevant peers. With this in mind, we present a few peers that, according

to us, is in a similar stage as A1M Pharma.

All of our peers are in preclinical or phase I with its main candidate (Cyxone have a

candidate that may enter phase II in 2020 but need to complete toxicity study first).

However according to us the market mainly looks at the three peers as company in

phase I, and therefore it is a relevant comparison.

Based on our peer valuation, we argue that our Base Case is realistic and that there

is clear upside potential in A1M Pharma, especially as A1M Pharma has presented

positive data in their first phase I trial.

Sensitivity analysis

LoA, WACC, and penetration are three of the key variables which impact our

valuation. We, therefore, provide two sensitivity analysis to illustrate this.


A1M Pharma: Peers

Market

cap

(SEKm)

Cash* EV Clinical Stage # Projects

Cyxone 218 24 194 I 2

Corline Biomedical 236 33 203 I 1

Kancera 167 9 158 I 4

Mean 185

Median 194

A1M Pharma 220 65 155 I 1

* Based on latest interim report

Source: Interim reports, Redeye Research

A1M Pharma sensitivity anslysis, share price

LoA

2 5% 10% 15% 20% 25%

10% 3,9 3,9 3,9 3,9 3,9

12% 2,9 2,9 2,9 2,9 2,9

WACC 14% 2,1 2,1 2,1 2,1 2,1

16% 1,5 1,5 1,5 1,5 1,5

18% 1,1 1,1 1,1 1,1 1,1

A1M Pharma sensitivity anslysis, share price

LoA

2 5% 10% 15% 20% 25%

10% -0,3 0,0 0,3 0,6 0,9

20% 0,0 0,6 1,2 1,8 2,4

Penetration % 30% 0,3 1,2 2,1 3,1 4,0

40% 0,6 1,8 3,1 4,3 5,5

50% 0,9 2,4 4,0 5,5 7,0


24

Summary Redeye Rating The rating consists of three valuation keys, each constituting an overall assessment of several factors that are rated

on a scale of 0 to 1 points. The maximum score for a valuation key is 5 points.

Rating changes in the report

People: 3

CEO Tobias Agervald has experience from Astellas Pharma and drug development which will be useful for A1M

Pharma. Management is backed by a lot of experience from the board. In 2019 both Göran Forsberg, extensive

experience from pharmaceutical development and currently CEO of Cantargia, and Johannes Hulthe, over 17 years

of experience from the pharmaceutical industry and previously vice-president at AstraZeneca.

Business: 2

There is a huge unmet medical need for a treatment against AKI, and a potential candidate to prevent this will be a

blockbuster. A1M Pharma, therefore, has started to take a position it in a very attractive field however its a lon g way

to go.

F inancials: 1

A1M Pharma's is a biotech company which will be without stable revenue until their candidate can reach the

market. They will need regular capital injections from the capital market until an eventual partner decided to finance

further development.


25

PROFITABILITY 2017 2018 2019E 2020E 2021E ROE 0% 0% 0% 0% 0% ROCE -423% -597% -180% -254% -610% ROIC 0% -356% 83% 1821% 1373% EBITDA margin 0% -

- - -

EBIT margin 0% - - - - Net margin 0% - - - -

Please comment on the changes in Rating factors……

INCOME STATEMENT 2017 2018 2019E 2020E 2021E Net sales 0 0 0 0 0 Total operating costs -68 -87 -14 -29 -27 EBITDA -68 -87 -14 -29 -27 Depreciation 0 0 0 0 0 Amortization 0 0 0 0 0 Impairment charges 0 0 0 0 0 EBIT -68 -87 -14 -29 -27 Share in profits 0 0 0 0 0 Net financial items 0 0 0 0 0 Exchange rate dif. 0 0 0 0 0 Pre-tax profit -68 -87 -14 -29 -27 Tax 0 0 0 0 6 Net earnings -68 -87 -14 -29 -21

BALANCE SHEET 2017 2018 2019E 2020E 2021E Assets Current assets Cash in banks 8 14 20 6 6 Receivables 1 1 0 0 0 Inventories 0 0 0 0 0 Other current assets 1 0 0 0 0 Current assets 10 16 20 6 6 Fixed assets Tangible assets 1 0 0 0 0 Associated comp. 0 0 0 0 0 Investments 0 0 0 0 0 Goodwill 0 0 0 0 0 Cap. exp. for dev. 0 0 0 0 0 O intangible rights 33 11 11 11 11 O non-current assets 0 0 0 0 0 Total fixed assets 34 12 12 12 12 Deferred tax assets 0 0 0 0 0 Total (assets) 44 27 32 18 18 Liabilities Current liabilities Short-term debt 0 0 0 15 36 Accounts payable 11 17 0 0 0 O current liabilities 1 14 14 14 14 Current liabilities 12 30 14 29 50 Long-term debt 0 0 0 0 0 O long-term liabilities 0 0 0 0 0 Convertibles 0 0 0 0 0 Total Liabilities 12 30 14 29 50 Deferred tax liab 0 0 0 0 0 Provisions 0 0 0 0 0 Shareholders' equity 32 -3 18 -11 -32 Minority interest (BS) 0 0 0 0 0 Minority & equity 32 -3 18 -11 -32 Total liab & SE 44 27 32 18 18

FREE CASH FLOW 2017 2018 2019E 2020E 2021E Net sales 0 0 0 0 0 Total operating costs -68 -87 -14 -29 -27 Depreciations total 0 0 0 0 0 EBIT -68 -87 -14 -29 -27 Taxes on EBIT 0 0 0 0 6 NOPLAT -68 -87 -14 -29 -21 Depreciation 0 0 0 0 0 Gross cash flow -68 -87 -14 -29 -21 Change in WC 10 19 -15 0 0 Gross CAPEX -34 23 0 0 0 Free cash flow -92 -45 -29 -29 -21

CAPITAL STRUCTURE 2017 2018 2019E 2020E 2021E Equity ratio 73% -11% 57% -58% -176% Debt/equity ratio 0% -1% 0% -142% -114% Net debt -8 -14 -20 9 30 Capital employed 24 -17 -2 -2 -2 Capital turnover rate 0,0 0,0 0,0 0,0 0,0

GROWTH 2017 2018 2019E 2020E 2021E Sales growth 0% 0% N/A N/A N/A EPS growth (adj) 0% -49% N/A N/A N/A

DATA PER SHARE 2017 2018 2019E 2020E 2021E EPS -8,15 -4,18 -0,11 -0,22 -0,16 EPS adj -8,15 -4,18 -0,11 -0,22 -0,16 Dividend 0,00 0,00 0,00 0,00 0,00 Net debt -0,92 -0,67 -0,15 0,07 0,23 Total shares 8,30 20,75 129,67 129,67 129,67

VALUATION 2017 2018 2019E 2020E 2021E EV -7,6 -13,9 181,0 210,0 231,3 P/E N/A N/A N/A N/A N/A P/E diluted N/A N/A N/A N/A N/A P/Sales N/A N/A N/A N/A N/A EV/Sales N/A N/A N/A

N/A N/A

EV/EBITDA N/A N/A N/A N/A N/A EV/EBIT N/A N/A N/A N/A N/A P/BV N/A N/A N/A N/A N/A

SHARE INFORMATION Reuters code A1M.ST List First North Share price 1,6 Total shares, million 129,7 Market Cap, MSEK 201,0 MANAGEMENT & BOARD CEO Tobias Agervald CFO Torun Labedzki IR Chairman Cristina Glad FINANCIAL INFORMATION Q3 report November 27, 2019 ANALYSTS Redeye AB Jakob Svensson Mäster Samuelsgatan 42, 10tr [email protected] 111 57 Stockholm Anders Hedlund [email protected]

SHARE PERFORMANCE GROWTH/YEAR 16/18E 1 month -20,5 % Net sales 0,0 % 3 month 49,0 % Operating profit adj -54,6 % 12 month -34,0 % EPS, just -88,5 % Since start of the year 154,1 % Equity -24,2 %

SHAREHOLDER STRUCTURE % CAPITAL VOTES Avanza Pension 10,2 % 10,2 % Rutger Arnhult 4,7 % 4,7 % Rothesay Ltd 3,9 % 3,9 % John Fällström 3,1 % 3,1 % Galba Holding AB 1,6 % 1,6 % UBS Switzerland AG 1,4 % 1,4 % Wilhelm Risberg 1,4 % 1,4 % Nordnet Pensionsförsäkring 1,3 % 1,3 % Håkan Nilsson 1,0 % 1,0 % Coeli AB 0,9 % 0,9 %

DCF VALUATION CASH FLOW, MSEK WACC (%) 14,0 % Fair value estimate MSEK 298 Assumptions 2017-2023 (%) Average sales growth 0,0 % Fair value e. per share, SEK 2,3 EBIT margin -

349 655,0 %

Share price, SEK 1,6


26

Redeye Rating and Background Definitions Company Quality

Company Quality is based on a set of quality checks across three categories; PEOPLE, BUSINESS, FINANCE. These

are the building blocks that enable a company to deliver sustained operational outperformance and attractive long-

term earnings growth.

Each category is grouped into multiple sub-categories assessed by five checks. These are based on widely

accepted and tested investment criteria and used by demonstrably successful investors and investment firms. E ach

sub-category may also include a complementary check that provides additional information to assist with

investment decision-making.

If a check is successful, it is assigned a score of one point; the total successful checks are added to give a score for

each sub-category. The overall score for a category is the average of all sub-category scores, based on a scale that

ranges from 0 to 5 rounded up to the nearest whole number.

The overall score for each category is then used to generate the size of the bar in the Company Quality graphic.

People

At the end of the day, people drive profits. Not numbers. Understanding the motivations of people behind a business

is a significant part of understanding the long-term drive of the company. It all comes down to doing business with

people you trust, or at least avoiding dealing with people of questionable character.

The People rating is based on quantitative scores in seven categories: Passion, Execution, Capital Allocation,

Communication, Compensation, Ownership, and Board.

Business

If you don’t understand the competitive environment and don’t have a clear sense of how the business will engage

customers, create value and consistently deliver that value at a profit, you won’t succeed as an investor. Knowing

the business model inside out will provide you some level of certainty and reduce the risk when you buy a stock.

The Business rating is based on quantitative scores grouped into five sub-categories: Business Scalability, Market

Structure, Value Proposition, Economic Moat, and Operational Risks.

Financials

Investing is part art, part science. Financial ratios make up most of the science. Ratios are used to evaluate the

financial soundness of a business. Also, these ratios are key factors that will impact a company’s f inancial

performance and valuation. However, you only need a few to determine whether a company is financially strong or

weak.

The Financial rating is based on quantitative scores that are grouped into five separate categories: Earnings Power,

Profit Margin, Growth Rate, Financial Health, and Earnings Quality.


27

Redeye Equity Research team

Management Björn Fahlén

[email protected]

Håkan Östling

[email protected]

Technology Team Jonas Amnesten

[email protected]

Henrik Alveskog

[email protected]

Dennis Berggren

[email protected]

Havan Hanna

[email protected]

Kristoffer Lindström

[email protected]

Fredrik Nilsson

[email protected]

Tomas Otterbeck

[email protected]

Eddie Palmgren

[email protected]

Oskar Vilhelmsson

[email protected]

Viktor Westman

[email protected]

Linus Sigurdsson (Trainee)

[email protected]

Editorial J im Andersson

[email protected]

Eddie Palmgren

[email protected]

Mark Sjöstedt

[email protected]

Johan Kårestedt (Trainee)

[email protected]

Life Science Team A nders Hedlund

[email protected]

A rvid Necander

[email protected]

Erik Nordström

[email protected]

K las Palin

[email protected]

Jakob Svensson

[email protected]

Ludvig Svensson

[email protected]

Oskar Bergman

[email protected]


28

Disclaimer Important information Redeye AB ("Redeye" or "the Company") is a specialist financial advisory boutique that focuses on small and mid -cap growth companies in the Nordic region. We focus on the technology and life science sectors. We provide services within Corporate Broking, Corporate Finance, equity research and investor relations. Our strengths are our award-winning research department, experienced advisers, a unique investor network, and the powerful distribution channel redeye.se. Redeye was founded in 1999 and since 2007 has been subject to the supervision of the Swedish Financial

Supervisory Authority. Redeye is licensed to; receive and transmit orders in financial instruments, provide investment advice to clients regarding financial instruments, prepare and disseminate financial analyses/recommendations for trading in financial instruments, execute orders in financial instruments on behalf of clients, place financial instruments without position taking, provide corporate advice and services within mergers and acquis ition, provide services in conjunction with the provision of guarantees regarding financial instruments and to operate as a Certified Advisory business (ancillary

authorization). L imitation of l iability This document was prepared for information purposes for general distribution and is not intended to be advisory. The informat ion contained in this analysis is based on sources deemed reliable by Redeye. However, Redeye cannot guarantee the accuracy of the information. The forward-looking

information in the analysis is based on subjective assessments about the future, which constitutes a factor of uncertainty. R edeye cannot guarantee that forecasts and forward-looking statements will materialize. Investors shall conduct all investment decisions independently. This analysis is intended to be one of a number of tools that can be used in making an investment decision. All investors are the refore encouraged to supplement this information with additional relevant data and to consult a financial advisor prior to an investment decision. Accordingl y, Redeye accepts no liability for any loss or damage resulting from the use of this analysis.

P otential conflict of interest Redeye’s research department is regulated by operational and administrative rules established to avoid conflicts of interest and to ensure the objectivity and independence of its analysts. The following applies: For companies that are the subject of Redeye’s research analysis, the applicable rules include those established by the Swedish Financial

Supervisory Authority pertaining to investment recommendations and the handling of conflicts of interest . Furthermore, Redeye employees are not allowed to trade in financial instruments of the company in question, from the date Redeye publishes its analysis plu s one trading

day after this date.. An analyst may not engage in corporate finance transactions without the express approval of management, and may not receive any

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from an underwriting institution in conjunction with a merger and acquisition (M&A) deal, new share issue or a public listing. Readers of

these reports should assume that Redeye may have received or will receive remuneration from the company/companies cited in th e report for the performance of financial advisory services. Such remuneration is of a predetermined amount and is not dependent on the content of the analysis.

R e deye’s research coverage

Redeye’s research analyses consist of case-based analyses, which imply that the frequency of the analytical reports may vary over time. Unless otherwise expressly stated in the report, the analysis is updated when considered necessary by the research department, for e xample in the event of significant changes in market conditions or events related to the issuer/the financial instrument. R e commendation structure

Redeye does not issue any investment recommendations for fundamental analysis. However, Redeye has developed a proprietary an alysis and rating model, Redeye Rating, in which each company is analyzed and evaluated. This analysis aims to provide an independent assessment of the company in question, its opportunities, risks, etc. The purpose is to provide an objective and professional set of data for owners an d investors to use in their decision-making.

R e deye Rating (2019-09-22)

D uplication and d istribution This document may not be duplicated, reproduced or copied for purposes other than personal use. The document may not be distributed to physical or legal entities that are citizens of or domiciled in any country in which such distribution is prohibited according to appl icable laws or other regulations. Copyright Redeye AB .

Rating People Business Financials

5p 11 8 1 3p - 4p 62 51 28

0p - 2p 13 27 57

Company N 86 86 86

CONFLICT OF INTERESTS

Jakob Svensson owns shares in the company : No Anders Hedlund owns shares in the company : No Redeye performs/have performed services for the Company and receives/have received compensation from the Company in connection with this.

Documents

A1M Pharma · e the stock into our Bear Case (SEK 0,4)territory –which would need A1M pharma to performe more studies before entering phase II. This would probably leading to severe